What Does Per Diem Mean? Different Types Of Per Diem, Rates & How To Calculate

Are you employed in a job that requires you to travel to different places from time to time? If so, you might also be aware of the term “per diem.”

You must have had some amount of compensation for your business travel expenses. If so, then you have received what they called per diem. This is a term related to your business tours. Once you understand it better and how it works, you will get a considerable amount of reimbursement for your business travel expenses.

This article covers what per diem means, how it works, and what are the benefits of per diem. If you are interested to learn about it, go through this article to find out.

What Is Per Diem?

Per diem is a term that refers to the ‘day-to-day’ allowance a company offers to their employees for the business trips they need to take. These expenses include reimbursement for travel, accommodation, meals, and different incidental costs ( partially reimbursed). Most employers usually issue per diem credits through the company credit cards issued to the employee. Or they do it through checks issued to the employee.

The term per diem itself means ‘by the day.’ This term is related to a type of compensation employers provide their employees every day. These employees are not employed like the regular employees. The per diem employees are salaried based on their assigned quotas or the day-to-day work. The per diem compensation model is clearly different from traditional employment that pays employees on an hourly or monthly salary basis.

Understanding Per Diem Reimbursements?

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The per diem payment method for employees compensates the employees for all the business expenses they have in a day. Each of the different businesses has their ways and plans for paying their employees. Their reimbursement policies are usually drafted in their travel guidelines. Most of the employers or governments that provide a per diem payment have a flat rate of business travel expenses planned out for their employees.

It can help employees cover the predicted cost they incur in the day for business or work-related travels. Employees commonly file an expense report to their employers or charge them for the expenses they have done on the company’s behalf. Usually, employees also carry out the costs themselves, and then they can get reimbursed later.

How Does Per Diem Work?

How does per diem work? Who is eligible for a per diem payment? What are some of the common expenses reimbursed through per diem? You will have the answers to your questions below –

Who Receives Per Diem?

Many companies and the government often provide their employees with per diem. It allows them to get reimbursed for different business trip expenses they have to take to different states. Employees can also use their per diem if they have to travel internationally for their jobs.

Per diem is not only paid to employees who are working closely with the organization. Employers can also provide their freelance workers or contractors with per diem. Employees working on company projects away from the office and having to travel for job purposes can qualify for per diem. These employees usually receive the cost of their travel, food, and lodging.

Expenses Covered Under Per Diem

Here are some of the expenses covered under per diem –

• Meals
• Lodging
• Transportation
• Incidental expenses

There are different types of per diem allowances based on the employer’s plans. For example, some employers might provide a $100 worth per diem for employee’s lodging during their business trip. But they might leave the meal expenses to the employees. This is called a partial per diem.

On the other hand, employees can provide employers with enough amount in per diem to help them cover all of their necessary travel expenses. It depends upon the employers and how they approach per diem for their employees.

How Do Employers Calculate Per Diem?

When calculating per diem for employees, there is a rate involved. The U.S. General Services Administration (GSA) sets standard federal rates for per diem. All the U.S. government employees eligible for a per diem receive per diem at the federal rate. Sometimes, private company employers also follow the government’s per diem standard as a guide for creating their own per diem rates.

Most of the companies follow the high and low methods for identifying the per diem rate for each location. It is a method to calculate per diem for each location based on the living cost in that area. If the employee has to stay in a high-cost location, then they will be reimbursed accordingly. However, now you can calculate per diem from the U.S. General Services Administration website.

It is similar to filing taxes in different states in the U.S.; you have different taxes and different tax rates and filing processes in different states in the U.S. Similarly, per diem calculation depends on the location one lives in.

What Are The Different Types Of Per Diems?

Here are some common types of per diems you can expect your employers to provide you –

Government Per Diem

The federal government employees receive the per diem based on the national rate established by the U.S. GSA. Aside from the federal government employees, some businesses also follow the national government rates.

Corporate Per Diem

Corporate per diem also covers different business travel expenses for the employees. However, this rate can vary, unlike the government per diem rate. It can be higher or lower than the government per diem rates. This totally depends on the needs of the business.

International Per Diem

International per diem is also travel expense reimbursement for employees traveling outside the U.S. The rate and the cost covered under international per diem depend on the country the employee has to visit and the living costs in that country.

Final Words

Whether you are a government employee or a corporate worker, if you have to visit different locations for your job, then you might be eligible for per diem. You can check it out with your employer and get the rate you can reimbursement for. U.S. employers can check the per diem calculator provided on the U.S. General Services Administration website.

Also, enquire how your employer calculates per diem and reimburses you for your expenses. Was this article helpful? Let us know through the comment section.

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